The impacts of international migrants’ remittances on household consumption volatility in developing countries

In this paper we investigate the impacts of remittances on reducing volatility of household consumption using a panel dataset of 84 developing countries during the period from 1980 to 2014. Our study is a partial replication of Combes & Ebeke (2011), who first investigated this issue using data for the period of 1975 to 2004 and found that international migrants’ remittances reduce household consumption volatility in developing countries. We improve their study by using more recent data, additional control variables, and by investigating the long run and the short run implications of international remittances in developing countries. Our results show that the volatility of household consumption can significantly be reduced by international migrants’ remittances. The robustness checks reinforce the stabilising impact of migrants’ remittances on consumption volatility in developing countries. Since overall consumption is an integral part of household welfare, the findings of this study highlight that international migrants’ remittances may indeed contribute significantly to households’ welfare by reducing the volatility of consumption in remittance receiving developing countries both in the short and long run.